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9/22/2017 12:11:25 AM
Posted: 8/18/2005 6:19:20 AM EDT
Looks like Kalifornia is going to take a bath if this happens.

www.usatoday.com/money/perfi/housing/2005-08-17-housing-valuations.htm
Link Posted: 8/18/2005 6:36:29 AM EDT
[Last Edit: 8/18/2005 6:36:45 AM EDT by KlubMarcus]
Yep! You've got to look at home prices vs. incomes. It's obviously getting too expensive and it won't matter if the demand is there when people simply can't afford one. The way things are going, you will see families moving into a big house together like the old days instead of paying more for two smaller houses separately. America became a world power with houses holding 2-3 generations under the same roof at the same time: grandparents, young adults, and grandkids. The economy has plenty of breathing room as far as housing families is concerned, but the ones stuck with unsold new or used homes are going to be HURTING.
Link Posted: 8/18/2005 6:37:00 AM EDT
long over due
Link Posted: 8/18/2005 6:42:46 AM EDT
do you think there is any correlatioin with liberal attitudes and spending decisioins and the overvalued areas? seems as if most are "blue".
Link Posted: 8/18/2005 6:45:37 AM EDT
<============= Can hardly wait, need a new house at a reasonable price
Link Posted: 8/18/2005 6:47:56 AM EDT
[Last Edit: 8/18/2005 6:50:48 AM EDT by DoNotTreadOnMe]
What is really going to kill them:

Most of the people are on Interest only loans (places with average home over $300K)with a balloon payment.. when they have to finance the balloon, the house will not appraise for that amount and the house will go to the bank.


Then the banks will have a house thats worth 70% what they loaned on it and they wont be able to recover.

Kalifornia will slide off into the ocean one way or the other. Physically or Financially
Link Posted: 8/18/2005 6:52:27 AM EDT
poll added
Link Posted: 8/18/2005 6:52:42 AM EDT
i don't think it will happen
Link Posted: 8/18/2005 7:04:30 AM EDT
If I recall, 70% of mortgages written in Kalifornia last year were interest-only loans.


Not a good sign, glad I don't live there
Link Posted: 8/18/2005 7:05:29 AM EDT
People keep moving there, and there is less and less land available. Just because people cannot "afford" it doesn't meant that people wont buy. In Tokyo, multi-generational (100 year) mortgages have existed for a while, apparently.

I think it is eminently possible that there will be no correction. I believe the increases will level off, and prices might stabilize, but I don't expect prices to drop anytime soon. (Unless people start moving OUT of California in huge numbers).



Than again - I know very little about real estate, so I might be completely wrong on this.
Link Posted: 8/18/2005 7:08:24 AM EDT
[Last Edit: 8/18/2005 7:09:05 AM EDT by California_Kid]

Originally Posted By DoNotTreadOnMe:
Looks like Kalifornia is going to take a bath if this happens.



Personally I wouldn't be affected by a 50% correction. I'm at less than 25% loan-to-value with 12 years left on a fixed mortgage.
Link Posted: 8/18/2005 7:13:46 AM EDT
[Last Edit: 8/18/2005 7:14:45 AM EDT by 223DEVIL]
I had just listed my townhome last month...Someone bought it in one day. AS long as the demand is there I don't see this happening. Maybe prices will level off a little but thats it. There are still alot of good paying jobs here. I don't see a population decrease either

This bubble talk in california has been going on for years. I think since the early 90's
Link Posted: 8/18/2005 7:18:57 AM EDT
I rode the wave as long as I dared.

The market has been slowing for the past few months and the handwriting is clearly on the wall.

When I inherited this house at the end of 1998 the assessed value was 165k. I put it on the market July 21 and had 3 offers by the 24th. No negotiation on price and damned little on the details.

Buyers inspection is done, nothing that I didn't already know and disclose.

Escrow closes on the 29th and I'm taking the money and leaving this insane asylum.

1 bedroom condos going for 200k. Median house price is nearly 600k. I frankly don't see how anyone can afford to buy in this market.
Link Posted: 8/18/2005 7:24:21 AM EDT
There's no bubble in So Cal: There's still a strong rental market, houses in decent to very good neighborhoods are being sold as fast as they are put on the market, rates are still pretty good, and the local economy is booming.

At worst, it'll flatten out some. The only possibility for a "bust" in this area is if the whole nation goes into an economic nosedive, as in "serious recession". Then, everyone is going to be hurting.



Sorry, Chicken Littles!
Link Posted: 8/18/2005 7:31:06 AM EDT
I love it #6

CA needs to be slapped back into reality. I'm thankful I own a home but can dream of selling it anytime soon as I couldn't afford anything more than what I have now. unless I do a interest only loan and there's NO WAY IN HELL that's going to happen.

Link Posted: 8/18/2005 7:33:20 AM EDT
[Last Edit: 8/18/2005 7:40:33 AM EDT by DoNotTreadOnMe]
What are average Total household incomes in So. Kalifornia?

Here in Fort Worth, Texas its 80k to 100K and average home prices are 150K (2200 sq ft in nice neighborhood)

My home: NEW - West of Fort Worth
2400 sq ft. All Brick
4 bedroom + Study and Dining Room.

Completed March 2005 Paid $145,000.00


also, its on 1/2 acre
Link Posted: 8/18/2005 7:35:28 AM EDT

Originally Posted By DoNotTreadOnMe:
What are average Total household incomes in So. Kalifornia?

Here in Fort Worth, Texas its 80k to 100K and average home prices are 150K (2200 sq ft in nice neighborhood)



Average home in LA is $600k, requiring a household income of $139k. Currently 12% of the Caliban make this income, usually dual incomes.
Link Posted: 8/18/2005 7:39:05 AM EDT
When the real estate bubble in Japan burst in the late 80's, values fell by an average of 80%. For the better part of a decade prior to that event, people swore there was no bubble, and that if there was, it would never burst.

"Those who do not learn from history are doomed to repeat it." George Santayana
Link Posted: 8/18/2005 7:56:14 AM EDT

Originally Posted By DScott:
There's no bubble in So Cal: There's still a strong rental market, houses in decent to very good neighborhoods are being sold as fast as they are put on the market, rates are still pretty good, and the local economy is booming.

At worst, it'll flatten out some. The only possibility for a "bust" in this area is if the whole nation goes into an economic nosedive, as in "serious recession". Then, everyone is going to be hurting.



Sorry, Chicken Littles!




We arent Libraels we are progressives
Link Posted: 8/18/2005 8:19:03 AM EDT
I think that we are going to see some fairly major inflation in the next few years as a trickle down from the current gas prices (not to mention the removal of the dollar/yen peg).

n real dollars, yes they will see a hit in Cali home prices. Prices will probably remain stable with modest increases, just not increase at the same rate as other inflation.

Grocery prices however are going to make us take it in the gut.
Link Posted: 8/18/2005 8:41:09 AM EDT

Originally Posted By DoNotTreadOnMe:
What is really going to kill them:

Most of the people are on Interest only loans (places with average home over $300K)with a balloon payment.. when they have to finance the balloon, the house will not appraise for that amount and the house will go to the bank.


Then the banks will have a house thats worth 70% what they loaned on it and they wont be able to recover.



Yep. A lot of people will lose their homes. Happened here in the 80's and it will happen again. Frankly I think the only reason the bubble hasn't burst is that interest rates have remained so low. As soon as they go up and people find their ARM's floating up and their payments too high to continue paying the bubble will definitely burst.
Link Posted: 8/18/2005 8:49:32 AM EDT

Originally Posted By California_Kid:

Originally Posted By DoNotTreadOnMe:
Looks like Kalifornia is going to take a bath if this happens.



Personally I wouldn't be affected by a 50% correction. I'm at less than 25% loan-to-value with 12 years left on a fixed mortgage.



Neither would anyone here who's sitting on a house for the past 2-3 years wihtout taking a cash out refi.

Example--we sold a 1200 square foot 1955 track home on a nices sized lot 2 years ago this month and moved up to a 3400 sq foot view/pool home.

Last week I learned that the house 3 doors down from our old home sold for 50,000 MORE than we paid for the new house.
Link Posted: 8/18/2005 9:26:41 AM EDT

Average home in LA is $600k, requiring a household income of $139k.

That debt to income ratio is scary! That's 4.3:1. When I worked for a guy that owned about 1,500 houses and usually financed the houses he sold, we wouldn't normally approve a loan that was more than 2:1. A local bank my wife worked for wouldn't go more than 2.5:1. 4.3:1 is a bad risk for the lender and the buyer.

Another way to look at it is that a 20 year $600k loan at 7% is $4,652/month. When you make $139k per year, your take-home pay is about $6,500/month. That doesn't leave that much room to pay for the expensive insurance on the expensive house, large property taxes for the expensive house, car payments, utilities, food, etc..

Apparently I helped raise more responsible relatives. My great-nephew just bought a house that was 1:1.25 what him and his wife make, and my nephew just bought a house that was very close to 1:1. When I built my house, I made about four times the amount per year that it cost to build. Now my house is worth about twice what I make per year.z
Link Posted: 8/18/2005 5:13:32 PM EDT

Originally Posted By zoom:

Average home in LA is $600k, requiring a household income of $139k.

That debt to income ratio is scary! That's 4.3:1. When I worked for a guy that owned about 1,500 houses and usually financed the houses he sold, we wouldn't normally approve a loan that was more than 2:1. A local bank my wife worked for wouldn't go more than 2.5:1. 4.3:1 is a bad risk for the lender and the buyer.

Another way to look at it is that a 20 year $600k loan at 7% is $4,652/month. When you make $139k per year, your take-home pay is about $6,500/month. That doesn't leave that much room to pay for the expensive insurance on the expensive house, large property taxes for the expensive house, car payments, utilities, food, etc..

Apparently I helped raise more responsible relatives. My great-nephew just bought a house that was 1:1.25 what him and his wife make, and my nephew just bought a house that was very close to 1:1. When I built my house, I made about four times the amount per year that it cost to build. Now my house is worth about twice what I make per year.z





Most *normal* lenders usually use a formula that's a little more complicated than that, and that refelcts income, expenses, mortgage payments, and property value.

Just a tad more accurate relevant. Might want to try it.
Link Posted: 8/18/2005 5:32:45 PM EDT
[Last Edit: 8/18/2005 5:33:16 PM EDT by BlackFox]

Originally Posted By zoom:

Another way to look at it is that a 20 year $600k loan at 7% is $4,652/month.



So why would you use a 20-year loan instead of the 30-year loan like over 90% of mortages? Seems like you're trying to make the numbers fit your hypothesis rather than the other way around.

If the US housing market collapses, the economy takes a major dump. If the US economy dumps, the world will be seriously affected. Do a google on housing bubble or real estate and read up. We are in a global economy these days. Yes, isolated markets have dropped (ex: Germany, which had risen like mad for a long time, Japan, Sydney Australia, Dallas, Detroit, California after the dot-com burst). All of these scenarios had a good reason to drop - fleeing job market, insane growth over extended time followed by small drop from peak, etc. The only people who got caught in these situations are those that needed to sell right when it dropped. I don't see the entire global economy collapsing over something like this, and if it did - those of you smug guys sitting at a 25% LTV won't feel so smug when the grocery store only takes gold, riots occur every day and we're all living like cavemen.

There's always a risk we'll see some huge losses. I hope not, because it would destroy at least 2 generation's dreams and have incredible global consequences. I really don't think it will happen, though. This is kind of like the game about what things cost in the 70's and 80's and people thinking that was expensive back then. It's all relative.....

Black Fox

Link Posted: 8/18/2005 5:40:37 PM EDT
But, but, how else are people going to refinance every two years and pay off credit cards they have maxed out by buying groceries and paying the electric bill because the BMW lease payment was too expensive?
Link Posted: 8/18/2005 8:45:20 PM EDT
BTW, if you buy a $1 million house, put 20% down, and finance the rest, the mortage is about $4300/month at 5% interest for 30 yrs.

That requires an income of about $200K per year, more or less.

Happens all the time out here. Weird, huh!
Link Posted: 8/18/2005 9:01:08 PM EDT
And people wonder why I am happy where I am at with my 493.00 a month 15 year house payment at 4.8 percent interest. Sheesh. Out in the country, couple of acres, and 30 lakes within 10 miles.
I know how many people are forclosed on NOW because I have to shut them off [gas and elec]It ain't pretty and it's getting worse. For every one who buys within there means there are 20 that are taking huge risks with IO loans and maxed C Cards. How many people are a month away from defaulting because of no cash reserves if they lose their job? Sad really. Houses owning people instead of the other way around.
Link Posted: 8/18/2005 11:31:30 PM EDT

Originally Posted By BlackFox:

Originally Posted By zoom:

Another way to look at it is that a 20 year $600k loan at 7% is $4,652/month.



So why would you use a 20-year loan instead of the 30-year loan like over 90% of mortages?


OK, so with a 30-year loan the payment is $3991, which doesn't really change my point. You spend so much more in interest w/ a 30-year loan that they just don't make sense. You'll pay over $300,000 more for the $600,000 house by financing it for 30 years versus 20. That's insane.

Are 90% of loans now really 30 years? I do about 600 tax returns per year, and I see a lot of 10, 15, a few 20, and very few 30 year mortgages. The two mortgages I co-signed on in the past year for family members were 5 years. Maybe people around here are just more responsible and live within their means.z
Link Posted: 8/19/2005 12:15:30 AM EDT
I dunno IF it will happen but it seems like it should.


My budy works for the Newport Beach PD...left LAPD for greener grass. The cheapest/closest house he could find SIX YEARS AGO was 455K and a little over 2 and half hours away. And it was a dump.


Sheep
Link Posted: 8/19/2005 12:25:09 AM EDT
Link Posted: 8/19/2005 4:31:55 AM EDT
anyone hear Greenspans address to congress last month. He warned of a correction.
Link Posted: 8/19/2005 4:37:33 AM EDT
[Last Edit: 8/19/2005 4:42:45 AM EDT by KlubMarcus]

Originally Posted By torstin:
do you think there is any correlatioin with liberal attitudes and spending decisioins and the overvalued areas? seems as if most are "blue".

Yes, there is. In the blue states, government and envirowacko oppression slows down development of new residential and commercial properties. That inflates the prices of existing ones and keeps common folk out of a house/business. Those existing residences and commercial areas are owned by rich liberals in the blue states and a few conservative hold-outs who were able to stand the stench of Socialism.
Link Posted: 8/19/2005 4:42:02 AM EDT

Originally Posted By 223DEVIL:
i don't think it will happen



Me neither. People have no trouble affording starter homes at 600K here. The cheapest homes in the newest developments in my city are 1.95Mil. of course you have to work your way up to that though. But for dual income families who have already pulled equity out of two or three homes prior that's doable.

Look at rent cost. Becuase interest rates remain historically low, you can buy a home for $500K for less than the cost of renting a two bedroom apartment.
Link Posted: 8/19/2005 4:45:41 AM EDT

Originally Posted By zoom:

Average home in LA is $600k, requiring a household income of $139k.

That debt to income ratio is scary! That's 4.3:1. When I worked for a guy that owned about 1,500 houses and usually financed the houses he sold, we wouldn't normally approve a loan that was more than 2:1. A local bank my wife worked for wouldn't go more than 2.5:1. 4.3:1 is a bad risk for the lender and the buyer.

Another way to look at it is that a 20 year $600k loan at 7% is $4,652/month.



Except home loans are 30 years and you can still find 30 year fixed for around 5%
Link Posted: 8/19/2005 5:10:39 AM EDT
We saw 10-25 percent corrections in the DC area in the late 1980s (it came back in the following decade and values are now 200-400 percent higher than the late 1980s). But I suspect it won't correct by 25 percent in California. A lot of the price stress there is because the government limits development so much, and population is only going to grow. Remember, many investments increase in a "lumpy" manner, not 5 percent a year like bank interest but 30 percent some years, minus 20 percent the next year, etc.

Link Posted: 8/19/2005 5:26:13 AM EDT

Originally Posted By DoNotTreadOnMe:
anyone hear Greenspans address to congress last month. He warned of a correction.




Greenspan will force a correction by raising interest rates. Bet the farm on that kernel of wisdom.

Interest Only Loan = Renting from the Bank who owns the house


My dear wife & I are within 8 weeks of having our place PAID IN FULL. It is a great feeling.

I see us being debt free in 12-18 months. It'd be sooner but we are paying for to fine young men to go to college.
Link Posted: 8/20/2005 1:16:53 PM EDT

Originally Posted By SouthHoof:

Originally Posted By DoNotTreadOnMe:
anyone hear Greenspans address to congress last month. He warned of a correction.




Greenspan will force a correction by raising interest rates. Bet the farm on that kernel of wisdom.

Interest Only Loan = Renting from the Bank who owns the house


My dear wife & I are within 8 weeks of having our place PAID IN FULL. It is a great feeling.

I see us being debt free in 12-18 months. It'd be sooner but we are paying for to fine young men to go to college.



Contrats, will be nice to have no house payment..... Probably buy a new gun every month with the extra cash...
Link Posted: 8/20/2005 1:41:29 PM EDT
Discussions of whether or not there's a "real estate bubble" miss the bigger picture.

It's a liquidity bubble, it's too much credit being force fed into a deflationary environment do to cheap labor and massive trade deficits. Low interest rates and reserve requirements are creating large amounts of junk debt.

We are borrowing 30% of our GDP every year in net new debt private and public. Meanwhile the debt going overseas undermines the real economy due to reduced demand for domestic products and real income declines.

Housing is simply where the inflation is channeled at the moment.

The housing bubble will burst along with all the other bubbles the minute people stop taking on new debt fast enough to maintain the money supply growth necessary to pay the costs of existing debt, and counteract the deflationary pressures caused by globalization. That's no longer in our hands, we've given our trade partners the power to move our interest rates at will by selling them so much debt. The fed is raising rates gradually to try to head off a spike the Chinese can create at will.

Suburban housing is vastly overvalued in many places. Imagine what a cash real estate market would look like.

If the housing bubble were to burst it would eventually result in a major change in the world monetary system, on the same order as the collapse of Bretton woods 35 years ago, or the new deal 35 years before that, because it isn't just houses, it's the entire monetary system that's in a bubble.

This is what we get for a giving the power to set interest rates to the Fed.
Link Posted: 8/22/2005 4:57:28 PM EDT
[Last Edit: 8/22/2005 5:00:14 PM EDT by DScott]

Originally Posted By KlubMarcus:

Originally Posted By torstin:
do you think there is any correlatioin with liberal attitudes and spending decisioins and the overvalued areas? seems as if most are "blue".

Yes, there is. In the blue states, government and envirowacko oppression slows down development of new residential and commercial properties. That inflates the prices of existing ones and keeps common folk out of a house/business. Those existing residences and commercial areas are owned by rich liberals in the blue states and a few conservative hold-outs who were able to stand the stench of Socialism.



Hahahahahahahahaha­hahahahahahahahahahahahaha!!!

[takes a breath]



Hahahahahahahahahahahahahahahahahah­ahahahaha!!!

<­BR>
Oh my. Now THAT is funny!!

I take it you're not a homeowner, or at least of something that wasn't moved onto the lot with wheels.

What's driving up prices on the SUPPLY of homes here is DEMAND. Everybody who owns property is pretty pleased with the way MARKET FORCES work. Unfortunately, there are those who'se earning capacity hasn't allowed them to participate in this BOOMING HOUSING MARKET.

"Capitalism. It's just not for rich liberals anymore." (tm)

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